The effect of uncertainty on foreign direct investment:The case of Mexico

The effect of uncertainty on foreign direct investment:The case of Mexico

This paper investigates the effect of uncertainty on FDI flows into the Mexican manufacturing sector during the period 2007-2015. Using a panel of manufacturing subsectors, we estimate a model by System GMM that includes domestic and external factors, as well as idiosyncratic and aggregate uncertain...

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Translated title: El efecto de la incertidumbre sobre la inversión extranjera directa: el caso de México
Journal Title: Estudios Económicos de El Colegio de México
First author: Gabriela López Noria
Other Authors: Juan José Zamudio Fernández
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Language: English
Get full text: https://estudioseconomicos.colmex.mx/index.php/economicos/article/view/355/358
Resource type: Journal Article
Source: Estudios Económicos de El Colegio de México; Vol 33, No 1 (Year 2018).
DOI: https://doi.org/10.24201/ee.v33i1.355
Publisher: El Colegio de México
Usage rights: Reconocimiento - NoComercial - SinObraDerivada (by-nc-nd)
Categories: Social Sciences/Humanities --> Economics
Abstract: This paper investigates the effect of uncertainty on FDI flows into the Mexican manufacturing sector during the period 2007-2015. Using a panel of manufacturing subsectors, we estimate a model by System GMM that includes domestic and external factors, as well as idiosyncratic and aggregate uncertainty measures as explicative variables. We also performsome simulations to assess the size of the uncertainty effect on FDI flows. The main results show that uncertainty discourages FDI flows into the Mexican manufacturing sector during this period. We also find that idiosyncratic uncertainty measures are more important in explaining FDI flows than aggregate uncertainty measures.
Translated abstract: Se investiga el efecto de la incertidumbre sobre los flujos de IED hacia el sector manufacturero mexicano durante 2007-2015. Con un panel de subsectores manufactureros estimamos un modelo por GMM en sistema, que incluye factores domésticos y externos, así como medidas de incertidumbre idiosincráticas y agregadas, como variables independientes. También se llevan a cabo simulaciones para evaluar el tamaño del efecto de la incertidumbre sobre la IED. Los resultados muestran que la incertidumbre desalienta a los flujos de IED hacia el sector manufacturero mexicano. Asimismo, se encuentra que la incertidumbre idiosincrática es más importante que la agregada para explicar la IED durante este periodo.